Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis
Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 4,400 units of product were as follows:
|Standard Costs||Actual Costs|
|Direct materials||5,700 lb. at $5.40||5,600 lb. at $5.20|
|Direct labor||1,100 hrs. at $17.60||1,130 hrs. at $18.00|
|Factory overhead||Rates per direct labor hr.,|
|based on 100% of normal|
|capacity of 1,150 direct|
|Variable cost, $3.10||$3,380 variable cost|
|Fixed cost, $4.90||$5,635 fixed cost|
Each unit requires 0.25 hour of direct labor.
a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
|Total direct materials cost variance||$|
b. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
|Total direct labor cost variance||$|
c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
|Variable factory overhead controllable variance||$|
|Fixed factory overhead volume variance||$|
|Total factory overhead cost variance||$|
Price variance = Change in price * actual quantity
= (5.40 - 5.20)*5600 = 0.20*5600 = 1120 (F)
Quantity variance = Change in quantity * Standard price
= (5700-5600)*5.40 = 100*5.40 = 540 (F)
Total direct materials cost variance = 5700*5.4 - 5600*5.2
= 30780 - 29120 = 1660 (F)
Rate variance = Change in rate * actual hours
= (17.60-18)*1130 = 0.4*1130 = 452 (U)
Time Variance = Change in hours* standard rate
= (1100 -1130)*17.6 = 30*17.6 = 528 (U)
Total direct labor cost variance = 1100*17.6 - 1130*18
= 19360 - 20340 = 980 (U)
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